Editor's Letter

What Winery Buyers Are Thinking

June 2010

by Jim Gordon

Hope isn’t much of a strategy,” said Randy Luginbill, vice president of winery relations for Silverado Premium Properties as he introduced four speakers during May’s Vineyard Economics Seminar. His point was that the recession has hit many winegrape growers hard. Fewer have long-term contracts, many are expecting lower per-ton payments this season, and quite possibly more growers than last year will have no home at all for their grapes—unless they custom crush.

Growers need to approach the changing grape marketplace with new ideas of their own, Luginbill said, rather than hoping for great deals from wineries. Who better to suggest new ideas than winery buyers themselves? That was the goal for the panel entitled, “Wine Buyers Tell What They Are Thinking.” Here’s a summary of a few of the speakers’ points.

Robert LaVine
Director of sourcing, Brown-Forman Wines
Besides having a great name for his job, LaVine has extensive experience in vineyards throughout the state. His main point was that growers can strengthen their positions by going organic and getting certifications. Since he sources grapes for Bonterra (all organically grown) as well as other brands, this is no surprise.

“Organic certification is a business opportunity for growers,” LaVine said. With organic certification, a grower gains a whole new market—wineries that put “organically grown” on the label—and doesn’t have to give up the old market. More growers are realizing that the transition to organic is less difficult and expensive than they imagined, he said. Further, property losses from holding back on an insecticide, for example, have rarely happened, so the rationale for not going organic is weaker than before.
Rachel Ashley
Director, technical viticulture and grower relations, Foster’s Wine Estates Americas
Ashley dug deeper into the bottle price issue, setting up her comments with graphs that showed how wide a county’s bottle price range can be—$15 to $300 for Napa Valley Cabernet Sauvignon—vs. how relatively narrow its price per ton range is when many contracts rely on weighted district average prices, even with adjustments.

Ashley advised growers to capitalize on the link between quality and price. With objective measures available today for anthocyanins, phenolics, vineyard variation and vine performance, growers can ask higher prices for their better blocks, but may have to settle for less from lesser blocks.

Joseph Wagner
Managing member, Caymus Vineyards
One of Wagner’s key points, that he welcomes growers who use mechanical means to keep costs down, is covered elsewhere in this issue. But the third-generation owner of Caymus also explained a new grape pricing method as an alternative to the formula of 100 times the bottle price = the per ton price, popularized by Andy Beckstoffer.

The Caymus formula uses a wine’s FOB price rather than retail, and calculates prices per ton with a multiplier, which his winery determined to be 180. Using suggested retail prices overlooks one of a winery’s biggest expenses: the cost of selling wine. He said that growers are usually not privy to a winery’s costs for free goods, special purchase allowances, incentives, depletion allowances, by-the-glass pricing, quantity discounts and so on.
Corey Beck
Director of winemaking and general manager, Francis Ford Coppola Winery
Beck elaborated on one of Rachel Ashley’s points: that better tools are now available to measure grape quality, and that growers should use these tools to determine not only where their grapes stand vs. potential competitors, but what flavor attributes they are contributing vs. what the winemaker’s goal for the wine is.

His winery measures the phenolics of each grower’s fruit using the Harbertson-Adams tannin assay, and charts the changes during fermentation. Each grower can view a graph and see if his produce hits near the target attributes. “It’s no more just about TA, pH and Brix, it’s about extract,” he said.

Readers who are growers will have to consider how much of the advice is relevant and useful to them. But I do think that the ongoing recession, the effects of which may still be getting worse for growers, is also a good call to action. Times have changed. Those who think and act proactively now to improve their grapegrowing and grape marketing will be in better shape for near-term survival and long-term prosperity.